Islamist militants in Iraq have occupied Saddam Hussein's former chemical weapons production facility, which contains a stockpile of old chemical weapon, the US government says.

US military officials don't believe the militants from the group also known as ISIL would be able to create a new weapon from the stockpiles left behind at the Muthanna complex about 60 kilometres northwest of Baghdad, according to the Wall Street Journal.

Nonetheless, the rapid loss of control of the key site in Iraq has unsettled US authorities after weeks of rapid gains by the Sunni militants.

"We remain concerned about the seizure of any military site by the ISIL," US State Department spokeswoman Jen Psaki said, according to the media outlet.

"We do not believe that the complex contains CW materials of military value and it would be very difficult, if not impossible, to safely move the materials."

However, US officials told the Journal that had they known Iraq would become so destabilised after the 2011 pullout of US troop, they would not have left the stockpiles in place.

The Islamic state in Iraq and the Levant (ISIL), an offshoot of Al-Qaeda-linked fighters in Syria, has rapidly swept through large parts of Iraq in recent weeks, undermining security in the country that is riven by sectarian division.

The claim the former Iraqi leader possessed weapons of mass destruction and posed a threat to world security was the basis for the 2003 US invasion of Iraq.

The weapons at Muthanna had been found by UN inspectors but were dismantled with chemical stocks militarily useless and closed off in bunkers.

"The entire Al Muthanna mega-facility was the bastion of Iraqi's chemical weapons development program," the Central Intelligence Agencywrote in a document published in 2007.

"During its peak in the late 1980s to early 1990s, it amassed mega-bunkers full of chemical munitions, and provided Iraq with a force multiplier sufficient to counteract Iran's superior military numbers."

"Two wars, sanctions and UNSCOM [United Nations Special Commission] oversight reduced Iraqi's premier production facility to a stockpile of old damaged and contaminated chemical munitions (sealed in bunkers), a wasteland full of destroyed chemical munitions, razed structures, and unusable war-ravaged facilities."